Class Warfare

Most Americans don't like to think or talk about our class system - when we do we tend to think of ourselves as "Middle Class", whatever that means. Actually our social class system is pretty well defined and fits generally into a four-six step structure:

Real Upper Class - The multi-generational Super Rich. This group - about one or two percent of the population - controls almost half the personal wealth of the nation.

Semi-upper, Upper Middle Class - The professional and business leaders. This group of those with advanced university degrees and solid job security make up about 20% of the population.

Middle Class - Upper working class - This group - many of whom have college training - make up middle management and skilled workers. This group was probably the largest social class group and has been hit hardest by the economic changes of the past decade, seeing its real income either stagnant or decreasing.

Working Class - Semi-skilled and industrial workers - Many members of this large group has seen their comfortable "middle-class" lifestyle disappear as the US has moved from an industrial to a technological world economy. Members of this group are mostly HS grads. Those who have individual skills or technical training in those areas of the economy that are growing (personal services, medical services, etc) are generally doing OK but have seen their real income decrease  in recent years.

Lower Class - the seldom - or chronically unemployed. This class - many of whom are minorities- have been hit hardest by the current "Great Recession" Many of them have taken two hits - no jobs and receding unemployment benefits.

This description of the existing American class structure is over-simplified and many sociologists have recently come up with their own alternative groupings, but all, or most of them, seem to be based on real family income, educational attainment, and group attitudes.

Historically, the rise of a large American middle Class seems to be tied to the New Deal politics which prevailed after the Great Depression of 1929- 47. This deliberate attempt to use government-financed programs to lift the Working Class and fading agricultural Classes into a more affluent Middle Class included the introduction of Social Security, federally financed mortgages [FHA], the National Labor Relations Act, The National Recovery Act, and ultimately the GI Bill educational benefits for veterans.

 All of these programs made real class mobility  possible, and despite the rather high income tax rates that accompanied them, led to an exceptional rise in real income for all social classes - including most notably  the Upper Class. As a result of those government-led programs, the US became the most powerful nation on Earth; helped of course by the destruction of Europe during World War II.  Curiously enough, US efforts to revive the world economies by distributing American tax monies (The Marshall Plan) to rebuild the world's economies further increased the US GNP and led to even greater prosperity.

The decline of the American "Middle Class "apparently began with the political shift away from government led economic programs starting with the "Reagan Revolution"in the 1980s. The idea that government was "…the problem not the solution…" in an age of  increasing world economic pressures and competition was a popular one  - if somewhat misguided. The collapse of the US middle class majority can be linked to that shift in government policy. Even though this concept has been prevalent for over thirty years, this has not stopped the government from increasing the federal debt and deficit several fold - mostly by lowering the income tax rates and thus reducing government income while at the same time greatly increasing government military spending. Payments on the debt this caused  has further decreased the limited amount available for social programs

  Attempts to lower this debt recently have led to further cutting of those federal benefits which many of the lower middle class depend upon and increasing the pressure on state and local governments. 

The housing/financial bubble collapse of 2008 led to a general world-wide financial collapse with the resulting economic ruin to the lives and hopes of many Americans in the "Middle Class".  The upper classes generally benefitted from this downturn. Their investments were soon either guaranteed by the government [the famous "Wall Street Bailout"or they were able to move financially into areas which were positively affected.

 The rich got richer and the poor got poorer - pretty quickly.

A general return to higher tax rates - especially for the upper income groups [That, after all, is where the money is] could allow the federal Government once again to lead the US into economic prosperity by enabling the federal Government to develop and encourage those policies which enabled US economic growth in the past. At the most basic level these policies should include massive investment in education, retraining, and infrastructure. These investments will inevitably lead to over-all economic growth . The increased taxed on the "Super-rich"will be a very good investment for them. Historically, in every case increased taxes have led to income increases for them far in excess to any taxes they paid.

What do we want from our government?

What do we want from our government?

A brief suggestion about how we can live happily ever after

The Federal, State, and local governments in the US share the responsibility for giving citizens those inalienable rights we hold so dear. We have given the government responsibilities in a number of expensive areas : 

Protection (Armed Services, Police, etc), 

Infrastructure (roads, utilities, Parks, government owned structures,  legal protection, etc), 

Health (Food & Drug Adm, Medicare, Medicaid, EMR, etc), 

Social programs (Social security, unemployment ins,) education in all its forms, foreign and domestic aid, etc)

Economic programs: (money supply & regulation, debt service, etc)

In all these areas the government actions are subject to political control and considerable public scrutiny.  The government is subject to public view more than any other social  or economic institutions.

 Despite constant cry about waste and bureaucracy, our government is actually pretty frugal and well-run. Most of its operating problems are probably the result of conflicting political control and demands. These sorts of problems are the result of our democratic legislative process and will always be with us.

  

  Government income comes from a small number of pretty well defined sources: Mostly Taxes.

The Federal Government collects income taxes in a rather complicated manner - mostly from withholding of part of salaries or other financial transactions, but it does depend upon voluntary filing and compliance. Other federal taxes include excise (on certain consumer products - everything from gas to tobacco) and tariffs on imported goods. State and local taxes are mostly income and  sales taxes, property taxes and excise taxes. 

  Another major source of income is the issuing of bonds - important to keep all levels of government going when expenditures exceed income and,  as the backup guarantee for savings and mortgage investments. The Debt Service (mostly interest on government bonds) mentioned above is an important government expenditure - how much it is depends on the confidence investors (bond buyers) have in the government.

  All governments try to balance their income and expenses. It is obvious that massive capital outlays - building and replacing infrastructure - unexpected catastrophic expenses, etc, cannot be pay-as-you-go - that's what the government debt (bond sales) are for. A frugal and economic government will not use its borrowing power to pay regular ongoing anticipated expenses. 

 A fairly simple solution to the current US deficit problem - which stretches from the Federal to  Local spending would be to decide which responsibilities we want the government to assume and then tax ourselves enough to pay for them.  Who gets taxed for how much is a political decision, but it seems to me that at the least we should go where the money is and tax the wealthiest in proportion to their wealth. A millionaire can afford a 40% income tax rate that would crush a factory worker trying to feed a family on the 2010 median income (approx $35000). Currently most millionaires pay less than 12% of their gross yearly income. Most corporations pay far less than individuals (In 2009, corporations paid approx $138 billion of over $2.1 trillion in income taxes collected.)

Obviously the current tax collection system has some loopholes.

Here are some of my suggestions:

 Determine what responsibilities we want the government to assume - those I have listed above are a much abbreviated list of the most essential.

  Determine the most efficient way to provide them consistent with our values. An example would be Medicare:           

  If it is made universal and for-profit insurance providers were removed from the programs, it would be cheaper and US citizens would pay a smaller percentage of their income for health care - as do most citizens of the world's developed nations.

 Generally removing private for-profit companies from basic government services should make those services more economical - if the services are administrated fairly and openly.  No citizen should be required to participate in offered services, but all citizens should be taxed to fund democratically decided government responsibilities.

Determine what amount of income the government needs to provide those services and responsibilities and tax everyone accordingly in the most fair and least hurtful manner. As a matter or principle, all citizens should pay some tax, however slight, as their civic responsibility.

The current political suggestions that we cut taxes and spending as a way of getting out from our current recession- generated  economic problems is precisely what Hoover and his administration tried in 1929-33, with disastrous results. To repeat the same solutions continually and expect different results is one definition of insanity.